‘They say’ you should never talk about politics when conducting business. Why exactly is that? Many ‘experts’ will say that real estate practitioners and other agents in an effort to ‘not offend’ the client should remain neutral in commentary.
Well, commentary is commentary, and probably better suited to a discussion time outside of the business day. However politics has, does and will affect the dealings of the market place.
Ever go in front of the local Planning Board for a building permit? Politics. Conservation Commission, Coastal Commission, EPA? Politics. Historic Commission, Zoning Board, ZBA? All Politics. Even the local condominium has an association full with ‘politics’.
The exchange of ideas is an important tool is in any venue. To hold back an opinion would be foolish. Sure there can be limitations on actual knowledge as every situation is unique to the outcome, but after enough laps around the sun a sense of what needs more investigation presents regularly.
National politics have changed the real estate landscape in profound ways many times in recent decades. Whether it be the savings and load crisis of 1986, the 1999 (GLBA) repeal of the Glass-Steagall Act, the no down payment mortgages widely accepted (and guaranteed by government) used until the ‘crash’, the 2008 TARP bailout or the 2010 Dodd-Frank law, all have had a major impact on the industry.
It can be tough to listen to the fallout of all those political movements when taking the events out of academic discussion and sitting face to face with real people trying to figure out ‘what next’. Quite a discussion can be had when speaking to someone still holding an upside-down note on their property.
Just last week during a client meeting the question was rhetorically asked “Why can a new purchase loan be offered at 4.25%, but I can’t refinance for less than 5.5%?” TARP, HARP, HARP 2, HARP 2.5, ZARP, CARP, what does it matter when you are looking for an exit strategy after 10 years of struggling?
Investment conversion might be a solution. Ah, a whole new set of political rules to learn… The business of an investor or landlord is not immune from any part of this discussion.
A good example of this might be the way in which the income from an investment property is treated. Not too many years back the 13-month rule was the ‘only’ solution. Convert the primary residence to a rental and 13 month later 75% of that income could be added to the gross annual income on a schedule E as part of the pre qualifying process.
Today there are lending institutions looking at that “exit property” as an investment from day one (as long as there is an arms length executory lease with deposits in hand). Point being that politics moved that benchmark. Those benchmarks can and do change with regularity.
One favorite real estate story to illustrate the direct affect that politics can have on a business venture is that of a mill owner in Massachusetts. The mill is no longer used for the original purpose, but the dam and surrounding infrastructure is all still in place to generate electricity.
The owner made a strong effort in time and money to gain permits allowing for the turbines to be reopened only to find that a total of 70 agencies would have to sanction the proposal, and even at that, the final governing agency would only issue a permit on an annual basis. Needless to say the project was not pursued.
It would seem that the political opposition to that project would be minimal. The dam is there. The river is there. The water flowing over the dam is still flowing. No new construction would change the waterway. Just open the pipe and let the water do the work to generate clean renewable energy. All of those agencies are part of the political structure.
How about that reserve fund the condo association has been talking about? Is the new roof for building 3 really needed? Have you been to those meetings? Those arguments have the potential to create a million hit youtube video when the right of personalities clash.
Politics are not as frequently defined by the professional media and are often most important at the local government level. Your property tax bill will be the direct result of the work done at your local city or town hall. The market place will judge the local school system, parks and flavor of neighborhoods to the upside or down.
Take care of where you live. Engage the process. Opinions have value.